Economic Crime and Corporate Transparency

Debate between Lord Garnier and Lord Sandhurst

Committee stage
Thursday 27th April 2023 Grand Committee

[Lord Sandhurst (Con)]

My Lords, I will speak with a particular focus on Amendment 91 but, in so doing, it should not be thought that I do not think that Amendment 94 is important; the two run together, as other noble Lords have said—we want them, so to speak, before and after, for reasons I shall explain. We need to do something now to prevent fraud. In this context, I make no apology for reminding my noble friend the Minister of what my noble friend Lady Morgan said about page 22 of our report and paragraph 520, which, helpfully, is in bold. I ask the Minister and his officials, in the words of the collect, to

“read, mark, learn, and inwardly digest”

what we have to say, and then act on it with both the regulatory and the criminal proposals.

We need the criminal offence but also need the flexibility that proper regulation will give and the culture change that it will bring by the regulators talking to and influencing how the different industries behave. We know that regulators can achieve much in advance and drive changes in behaviour; that is important because we know that prosecuting fraud is very difficult and too often ends in failure—and anyway the resources are not there to do it. We have to stop it happening in the first place. You have the criminal offence as a backup when someone who could have prevented it has not done so, but that is very much the last resort. Regulators are fleeter of foot and can move with more flexibility, and they can influence behaviour.

The sort of regulations we have in mind would mirror what is said in Amendment 94, particularly in subsection (3) regarding the statutory defence—“Do you have in place such procedures as it is reasonable in all the circumstances to expect?”, and so on. Our regulations would say that that was what you had to do. Then the regulator would know what was going on because it would have all the data and the picture of what was happening in the particular regulatory sphere in which it was operating. The regulator could say to a particular operator or someone in the industry, “Look, others are doing this but you’re not”, or it could say to the whole industry, “Look, there’s a new scam about and you have to take steps to stop it. We’re going to call you together. What are you going to do, what do you think you can do, and what technology is out there?”, and so on. That is not covered directly by the criminal offence—it is very much a longstop—but the sorts of fines and penalties that a regulator can impose, and the regulatory damage to the reputation of large organisations in particular, are important and have great influence, as we know. If a company is small or indeed a one-man band then the regulator would approach it differently, because of course it does not have the resources to look everywhere and man every pump.

We have to do something. I suggest that what is reasonable will take into account the size of the potential offending business; the measures that it has in place to prevent fraud that are proportionate to its size; those which it does not have in place but could have; the prevalence of the offence within that particular field of activity; and, if it is looking at regulatory enforcement, and indeed in terms of criminal offence, the regulatory compliance history of the company and what others in that area are doing by way of comparison. I need not go on in more detail.

As I said, the regulators have flexibility. They can influence behaviour. They can pick up the telephone to a company and say, “We’ve seen this is going on. Unless you do something, we’ll be down like a ton of bricks”, or they can act directly. Unless we have the package that these two amendments would give, we are not going to see any important change in outcomes.

That is all I need to say. Everything else has been covered. As I hope I have made plain, I see Amendments 94 and 91 running in tandem.

[Lord Garnier (Con)]

My Lords, I agree with my noble friend Lord Sandhurst that they run in tandem. I was not able to run quick enough to be able to sign Amendment 91 but I managed to get my bulk into the relevant Room in order to sign Amendment 94, and I am happy that I managed to do so.

Public opinion must influence policy-making. Whereas 300 or perhaps 250 years ago, anyone who thought about it probably thought it was not a good idea, and certainly not a humane thing to do, to send small children up chimneys or down mines, it took a little while for the legislation to change. I make that exaggerated point—well, it was not an exaggerated point; it was a very bad thing. [Laughter.] I was not alive 250 years ago. I make that point to illustrate that we in this Parliament are in danger of allowing the Government to drag their feet reluctantly and, worse, to appear as if they are being reluctant to do the modern equivalent of stopping children being sent up chimneys. The modern equivalent is that the public, and I as a citizen, disapprove of companies failing to conduct their business in such a way that crimes are not committed by associated people. However, we mitigate the difficulties that these new laws may pose for a company by putting in the defence of reasonable provision.

If you look at the guidance published in conjunction with the Bribery Act 2010—my noble friend Lord Sandhurst mentioned some of the sensible work that has been highlighted in my noble friend Lady Morgan’s report—you can see that it is all there. If your company is one that has no risk of committing bribery, you do not have to have anything other than the most minor provision to satisfy the defence provision under the Act—and ditto in the Criminal Finances Act. So it is even in the government amendments that we discussed earlier. For example, to go back to government Amendment 84A, which we discussed earlier, new subsection (3) says that:

“It is a defence for the relevant body to prove that, at the time the fraud offence was committed … (a) the body had in place such prevention procedures as it was reasonable in all the circumstances to expect the body to have in place, or … (b) it was not reasonable in all the circumstances to expect the body to have any prevention procedures in place”.


The Government accept quite a liberal and permissive defence regime there, so we do not need to be frightened or to frighten SMEs, or the people to whom my noble friend’s report is addressed, about people being overburdened by regimes which will cause them to be distracted from earning profits and getting on with the job that they are primarily there to do.

The noble Lord, Lord Macdonald of River Glaven, highlighted, thanks to Sue Hawley from Spotlight on Corruption, the very small cost involved in running a compliance regime. If you have a small company, with no risk of committing bribery or fraud or whatever else it may be, the chances are that you will spend very little, and you may have to spend it only once.

I come to Amendments 91 and 94 with a sense of desperation that we are now providing the Government with yet another opportunity not to do very much, and they ought to be doing a lot more. When it came to the passage of what became the Health and Safety at Work etc. Act 1974, I can assure noble Lords that the corporate world said, “Oh no, you mustn’t do this—it’s going to make us spend money, look at lawyers, put bolts on doors and put safety notices down chimneys and near machinery. It is all far too expensive—we can’t be doing all that”. I think of the Corporate Manslaughter and Corporate Homicide Act 2007; in the lead-up to that—I was in the shadow Cabinet of my party in those days—we had anxious discussions about the hideous nature of the impositions that would be put on the corporate world to make things safe so that people did not get killed at work and factories were safe places to go to work in. Here we are again having to worry about companies being asked to behave themselves and not to commit crimes or to prevent others committing crimes to their advantage. It seems absurd.

There have been two good non-legislative reports in the last short period. First, there is the one from my noble friend Lady Morgan, which she introduced us to. I urge my noble friend the Minister, if he has time to read nothing else, to look at page 22 and paragraphs 496 to 498 and 520 to 522. It will take him three minutes—he should look at it, read it, learn it, and inwardly digest it.

The other one was the Joint Committee chaired by my noble friend Lord Faulks, of which I was privileged to be a member, on the draft Registration of Overseas Entities Bill, which sat in 2019-20. We heard all the same evidence as I am sure my noble friend did in her committee, and we heard all the same complaints about the burdens and expense of compliance that will have been heard every time these sorts of things come along. Yet every time, all you have to do is go back and look at the simple, common-sense guidance attached to the Bribery Act 2010; you will see how that Act has come into force and been implemented and worked through, and no one now fusses at all.